Are basic materials stocks about to suggest that the economy is about to grow/inflate?
An important price test is in play for them that will go a long way to answering this question.
The chart looks at
Basic Materials ETF (NYSE:XLB) from Marketsmith.com.
The chart highlights that XLB has spent the majority of the past five years inside of the trading range (1). XLB hit the bottom of the range in March, where support held and bullish reversal patterns took place.
Currently, XLB is now testing its 2017 highs and the top of its trading range at (2).
Is XLB creating a double top while at the 2017 highs? Or, is it about to breakout and suggest that economic growth/inflation is about to pick up speed?
If a breakout is successful, look for stocks and commodities to perform well to the upside.
If XLB peaks again, they would be suggesting inflation has run its course and commodities are peaking.
The power of the pattern suggests what XLB does at (2), will send a rather important message about the health of the overall economy.
